As Japan looks toward an economic recovery next year, the country’s largest automobile manufacturer may be one of the companies that stand to benefit the most.
Toyota Motor Corporation (TYO: 7203, NYSE: TM) looks undervalued even when not considering macroeconomic factors. It trades at only 10.5 times projected fiscal 2014 earnings, and the company’s quarterly earnings per share of $1.40/¥138.26 represented close to a 70% year over year gain. Toyota has also undergone recent cost cutting, which has helped boost its profit.
However, looking at the company in the context of Japan’s economic trends is when Toyota looks like an amazing buy.
Because Toyota makes the vast majority of its money outside Japan, a weak Yen is positive for the company’s health. Many analysts are bearish on the Yen, which is down nearly 20% this year against the U.S. Dollar. The Japanese central bank’s has an inflation goal of 2%: a target which would require the currency to be devalued by 15% a year, for the next five years.
Toyota has also been tapping into emerging markets, many of which have high consumption growth.
Shares of Toyota Motor Corporation in Tokyo closed higher today at ¥6180, up 0.10%.